MFC Asset fund locks targeted returns at 10%

If this is any indicator, it is that the local economy and equity market are weakening as the result of inflation mismanagement.

The Thai financial sector has been very resilient since the beginning of the year, said Narongchai Akrasanee, chairman of MFC Asset Management. Year-to-date market movement, although negative, has fared better than in many other countries, at -7.31 per cent, compared to, for instance, MSCI Asia Free ex-Japan's -17.66 per cent - both in US dollars.

But its tenacity is fading, as people are hit by higher living costs and businesses suffer from rising marginal costs, said Narongchai.

"If you were to have asked me in January whether to invest here or overseas, I would have said invest in Thailand with the global economy hit by a slowdown and the credit crunch," said Supakorn Soontornkit, MFC's first executive vice president. "But now, I think Thailand is a much riskier environment."

Although confidence might have faltered in the past weeks - especially that of foreign investors, caused by a string of street protests - the government still stands a chance of steadying the economy if it manages inflation correctly, said Narongchai, who is a former commerce minister.

And this, he said, would not come from the government controlling prices. He believes such a move would only add to inflation, as producers have no room to manoeuvre and are forced to cut their outputs.

Narongchai added that reining in inflation could only be achieved by involving all parties - just as the previous government had last year successfully steered the baht from strengthening further.

To tap into investors' fear of uncertainty, MFC's new PRO10 Premium target fund is very well diversified. Besides highly liquid stocks, the fund will invest in investment-grade bonds, deposits, hybrid equity-debt instruments and SET50 Index Futures.

The new closed fund is most similar to MFC's previous target fund, the PRO10, which has an actual return of 11 per cent and was liquidated in four months, once it hit its target of 10 per cent.

After its initial public offering, which ends on June 25, the fund will dissolve if its unit price dips below Bt11.20 for five consecutive business days, or if it meets or exceeds its 10-per-cent target. The PRO10 Premium fund will guarantee the seed investment.

Trailing behind only SCB Asset Management and Kasikorn Asset Management in terms of market share, MFC has since the beginning of the year launched eight funds -including two foreign investment funds, a property fund and a bond fund - totalling Bt12 billion.

It has been building up its sales channels, particularly sales agents in international banks such as Standard Charter and Citibank, said Pichit Akrathit, president of MFC Asset Management. Sales have also been boosted from its corporate and investment planner teams - MFC's core channel.

As of May 30, MFC's total net asset value had grown by 4.28 per cent to Bt152 billion, from last December's Bt146 billion. Its provident fund business now has 527 clients with Bt51 billion under management. The size of its private fund operation is now Bt21 billion.